{
  "title": "IMF Survey : Geopolitical Risks Cloud Future of Russian Economy",
  "publication": "IMF News, June 30, 2014",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/socar063014a",
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  "summary": "Russia’s economy continued its slow pace of growth in 2013, reflecting pre-existing structural problems and the fallout of geopolitical tensions with Ukraine.",
  "publishDate": "2014-06-30",
  "sections": [
    {
      "heading": "Growth performance and structural constraints",
      "content": "- Russia’s economy continued its slow pace of growth in 2013, reflecting pre-existing structural problems and the fallout of geopolitical tensions with Ukraine.\n- Capacity constraints:\n  - The entire economy hit capacity constraints in 2011, as evidenced by the beginning of the economic slowdown, while inflation remained elevated.\n- Growth model issues:\n  - Growth is based on energy exports, which were supported by significant oil price increases since 2000, and the use of spare capacity in the economy.\n  - With oil prices stabilized and spare capacity exhausted, growth has slowed significantly."
    },
    {
      "heading": "Geopolitical uncertainties and sanctions: effects on investment and markets",
      "content": "- Sanctions and investor perception:\n  - Sanctions were adopted by the United States, European Union, Japan, and other countries in response to the situation in Ukraine.\n  - Concerns about possible escalation of sanctions increased the perceived risk of doing business in Russia, chilling investment.\n- Financial market responses:\n  - Initially: capital outflows increased significantly; bond issuances by the government and Russian companies declined sharply; borrowing rates increased markedly; the stock market declined; sharp pressures on the ruble.\n  - Policy responses: Russia’s central bank increased interest rates, reduced the flexibility of the ruble, and used its foreign exchange reserves to support the ruble.\n  - More recently: as perceived risk of additional sanctions subsided, the stock market and the ruble rebounded and companies considered issuing bonds externally.\n- Outlook:\n  - Uncertainties are expected to linger, hampering growth in the short term and possibly the medium term."
    },
    {
      "heading": "Policy recommendations to boost investment and growth",
      "content": "- Key areas for reform highlighted:\n  - Address problems of governance, corruption, administrative barriers, and regulation to attract more and better investment.\n  - Continue efforts at global integration to attract investment and foreign technology.\n  - Reinvigorate the privatization agenda.\n  - Improve competition.\n  - Increase the size and efficiency of the banking sector.\n  - Reduce price distortions, especially utility prices."
    },
    {
      "heading": "Public pension system: reforms and remaining challenges",
      "content": "- Concerns:\n  - Growing concern about the viability of the public pension system due to adverse demographic dynamics and statutory retirement ages.\n- Statutory retirement ages:\n  - 60 for men and 55 for women.\n- Recent reform assessment:\n  - Reform was described as timid and incomplete: it did not increase the statutory retirement age but introduced financial incentives to delay retirement and increased the minimum years worked required before claiming a pension.\n  - Reform linked pension benefits to resources available in the pension fund, including government transfers.\n  - Authorities expect a gradual reduction in the generosity of benefits over time.\n- Risks and further measures needed:\n  - Reduction in generosity may translate into pressure on the government to allocate more money to the pension fund.\n  - Suggested additional measures: increase the retirement age, encourage formalization of employment in the underground economy, and improve contribution compliance."
    },
    {
      "heading": "Impact of the Ukraine crisis on Russia and sectoral vulnerabilities",
      "content": "- Direct economic linkages:\n  - Exposure of Russian banks to Ukraine is less than 2 percent of Russian banks’ assets.\n  - The share of Ukraine in Russian exports is less than 5 percent.\n- Energy transit risk:\n  - About half of Russian gas exports to Europe go through Ukraine; disruption of gas delivery to Europe could impact Russia given limited possibility of rerouting through other pipelines in the short run.\n- Sectoral integration risks:\n  - Sectors like base metals, transportation equipment, and chemicals are closely integrated; disruption of supply chains could have important impacts within these sectors.\n- Confidence channel:\n  - Lingering uncertainties about Ukraine could undermine consumer and investor confidence in Russia, further affecting domestic consumption and investment."
    },
    {
      "heading": "Spillovers to neighboring and connected countries",
      "content": "- Trade and remittance exposures:\n  - Countries with large trade exposure to Russia listed: Belarus, Estonia, Lithuania, Lithuania, Turkmenistan, Ukraine, and Uzbekistan.\n  - Countries receiving large remittances from Russia listed: Armenia, Kyrgyz Republic, Moldova, and Tajikistan.\n- Financial center exposures:\n  - Some financial centers with significant exposure to Russia through foreign direct investment: Cyprus, Luxembourg, The Bahamas, Saint Kitts and Nevis, and Seychelles.\n- Energy dependence and risks from gas export disruption:\n  - Finland, the Baltic countries, Belarus, and Czech Republic rely almost entirely on Russian gas for their domestic consumption.\n  - Dependence is also high at 40–60 percent in central Europe and southeastern Europe.\n  - For these countries, disruption of gas exports by Russia could have significant impact on their economies.\n\nIMF Survey: Geopolitical Risks Cloud Future of Russian Economy — June 30, 2014\n\n---\n\n Content in this bundle\n\n- Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Country Focus\n- IMF Survey Interview\n- Read the statement\n- The IMF and Russia\n- Europe’s economic outlook\n- Ukraine’s support program\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar063014a"
    }
  ],
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    "[Markdown version](/en/news/articles/2015/09/28/04/53/socar063014a/index.md)",
    "[Structured JSON version](/en/news/articles/2015/09/28/04/53/socar063014a/index.json)",
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    "Published: June 30, 2014",
    "Russia’s economy continued its slow pace of growth in 2013, reflecting pre-existing structural problems and the fallout of geopolitical tensions with Ukraine.",
    "Capacity constraints:",
    "Growth model issues:",
    "Sanctions and investor perception:",
    "Financial market responses:",
    "Outlook:",
    "Key areas for reform highlighted:",
    "Concerns:",
    "Statutory retirement ages:",
    "Recent reform assessment:",
    "Risks and further measures needed:",
    "Direct economic linkages:",
    "Energy transit risk:",
    "Sectoral integration risks:",
    "Confidence channel:",
    "Trade and remittance exposures:",
    "Financial center exposures:",
    "Energy dependence and risks from gas export disruption:",
    "[Country Report (PDF)](/external/pubs/ft/survey/so/2014/www.imf.org/external/pubs/ft/scr/2014/cr14175.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[IMF Survey Interview](https://www.imf.org/en/news/search)",
    "[Read the statement](http://www.imf.org/external/np/ms/2014/043014a.htm)",
    "[The IMF and Russia](http://www.imf.org/external/country/RUS/index.htm)",
    "[Europe’s economic outlook](http://blog-imfdirect.imf.org/2014/04/11/europes-economic-outlook/)",
    "[Ukraine’s support program](http://www.imf.org/external/pubs/ft/survey/so/2014/NEW043014A.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
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